Brent crude futures dipped 0.4% to US$65.40 a barrel by 0318
GMT, while US West Texas Intermediate crude was also down 0.4% to US$63.16 a
barrel.
Both benchmarks had climbed about 2% on Tuesday to a
two-week high, driven by worries over supply disruption from Canadian wildfires and
expectations that Iran would reject a US nuclear deal proposal key to
easing sanctions on the major oil producer.
"Despite fears over Canadian supply and
stalled Iran-US nuclear talks, oil markets are struggling to extend
gains," said Tsuyoshi Ueno, senior economist at NLI Research Institute,
adding that the OPEC Plus increases were capping the upside.
Ueno said hopes for progress in US-China trade talks were
overshadowed by profit-taking, as investors stayed cautious over the broader
economic fallout from tariffs.
US President Donald Trump and Chinese leader Xi
Jinping are likely to speak this week, White House press secretary
Karoline Leavitt said on Monday, days after Trump accused China of violating a
deal to roll back tariffs and trade curbs.
On Tuesday, the Organisation for Economic Co-operation and
Development (OECD) cut its global growth forecast as the fallout from
Trump's trade war takes a bigger toll of the US economy.
"The current backwardation in the front of the crude
oil futures curve is a result of low inventory balances observed since the
beginning of the year," BofA analysts told clients in a note.
Some analysts expect the loss in Canadian supply to offset
more than half the increases next month planned by OPEC Plus.
"Estimates suggest around 350,000 barrels per day have
been affected and shut in," said SEB analyst Ole Hvalbye, referring to the
impact of the wildfires.
"To put this in context, the disruption exceeds
three-quarters of the volume OPEC Plus agreed to add to the market in
July."
